Export credit risks

Sales of exported products on deferred-payment terms carry risks not found in the case of sales in domestic markets. Reliable information concerning prospective foreign buyers may be hard to obtain, making it difficult to accurately assess their credit-worthiness. Suppliers fear that in case of non-payment it may prove complicated or costly to press their claims in foreign courts, and that in the buyer's country alien creditors may not always receive the same treatment as do domestic creditors. In addition to commercial risks (insolvency and default of the buyer), external trade involves important non-commercial risks arising from events beyond the control of both buyer and supplier. Losses may be caused by political events such as war, rebellion and expropriation, by catastrophes such as hurricanes, floods and earthquakes, and by monetary phenomena such as foreign exchange shortages and other transfer difficulties. When such events occur before delivery of the goods, they may prevent the buyer from fulfilling the contract or make it impossible to transport the goods to their destination. When they occur after delivery, they may render previously solvent, buyers insolvent or prevent payment by solvent buyers. Export credit insurance schemes alleviate some risks for nationals of some countries, but there are inequalities among the insurance plans and there are some countries for which no insurance is available.